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Monday, Dec 05, 2022

What government curbs on exporting rice mean for India and the world

The curbs announced will affect just under half of India’s rice exports in terms of quantity and over a third by value.

rice exports explainedIndia, in 2021-22 (April-March), shipped out a record 21.21 million tonnes (mt) of rice valued at $9.66 billion. (Express file photo by Abhishek Saha)

The Narendra Modi government, barely four months ago, banned exports of wheat from the country, following an unexpected crop failure resulting in low procurement and depletion of public stocks. Concerns over a similar situation arising have now led it to impose curbs, albeit not outright ban, on rice shipments as well.

What are the restrictions that have been put on rice exports?

There are four categories of rice exports. Out of these, exports in the case of two – basmati rice and parboiled non-basmati rice –are still freely allowed. The curbs are only for the other two: raw (white) and broken non-basmati rice.

On Thursday, the Department of Revenue in the Ministry of Finance notified the slapping of a 20% duty on exports of rice “other than parboiled and basmati rice” with effect from September 9. This would have covered all raw non-basmati rice shipments, whether of full or broken grains. However, on the same night, another notification from the Directorate General of Foreign Trade in the Ministry of Commerce and Industry imposed a blanket ban on broken rice exports. Thus, even within raw non-basmati, only export of full grain consignments would be permitted on payment of 20% duty.

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How much would all this impact the country’s overall rice exports?

India, in 2021-22 (April-March), shipped out a record 21.21 million tonnes (mt) of rice valued at $9.66 billion. That included 3.95 mt of basmati rice worth $3.54 billion (on which there are no restrictions) and 17.26 mt of non-basmati shipments valued at $6.12 billion. Within the latter, 7.43 mt ($2.76 billion) comprised parboiled rice exports, which will also be allowed freely.

The restrictions apply only in respect of the balance 9.83 mt ($3.36 billion). This covers 3.89 mt ($1.13 billion) of broken rice, whose exports have been prohibited, and 5.94 mt ($2.23 billion) of non-parboiled non-basmati rice, whose shipments will henceforth attract 20% duty.

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Simply put, the curbs announced will affect just under half of India’s rice exports in terms of quantity and over a third by value.

Why have these restrictions been placed?

There are two basic reasons. The first is the possibility of India’s rice production declining significantly because of deficient monsoon rainfall in Uttar Pradesh, Bihar, Jharkhand and Gangetic West Bengal. During the current kharif cropping season from June 1 to September 9, farmers have planted 2.1 million hectares (mh) less area under rice compared to the same period last year. The gap was higher, nearly 4.4 mh, till the second week of August. Since the normal planting time for paddy is June-July, and any area covered after that would be of lower-yielding shorter-duration varieties, it is bound to reflect in output. Taking an average all-India rice yield of 2.7 tonnes per hectare, the hit could be in the 6-12 mt range.

It might be even more if yields in Punjab and Haryana turn out lower due to a new virus that has caused “dwarfing” of paddy plants in many fields there.

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The second has to do with stocks. Public wheat stocks on August 1, at 26.65 mt, were the lowest in 14 years for this date. While the same for rice, at 40.99 mt, was quite comfortable (albeit lower than the 44.46 mt on August 1, 2021), the government is worried about their depletion in the event of a sub-par kharif harvest. This is more so, given the political pressure to continue the free-foodgrains scheme (Pradhan Mantri Garib Kalyan Anna Yojana) beyond September. With very little wheat in government godowns, it is rice that is sustaining the public distribution system (PDS).

The 10-mt likely fall in rice output this year is, interestingly, also roughly the quantity of exports that may be affected by the September 8 notifications.

How important is India to the global rice trade?

rice exports The 10-mt likely fall in rice output this year is, interestingly, also roughly the quantity of exports that may be affected by the September 8 notifications. (Express)

The country has a 40% share of the world’s total rice exports, with its 21 mt-plus shipments last year way ahead of Thailand’s (7.2 mt), Vietnam’s (6.6 mt) and Pakistan’s (4.8 mt). India, thus, matters to the global trade in rice – unlike in wheat, where it is only an occasional large exporter (see table). Even in 2021-22, when exports touched an all-time-high of 7.23 mt, its share in world wheat shipments was hardly 5%. India’s wheat export ban, imposed on May 13, made news largely on account of timing – in the midst of the war in Ukraine. In a normal year, it may not have.

Where does India export rice to?

More than 75% of basmati exports last year were to Iran and the Arabian Peninsula countries; the US, UK, Canada and Australia added up to another 10%. In non-basmati rice, almost 55% went to African countries – including Benin, Ivory Coast, Senegal, Togo, Guinea, Madagascar, Cameroon, Djibouti, Somalia and Liberia. Another 9.5% each was accounted for by the top two individual buyers China and Bangladesh, followed by Benin and Nepal (8-9% each). Much of exports to Africa and Bangladesh consist of parboiled rice, while China’s imports were predominantly broken rice that has now been banned.

Now, what exactly are parboiled and broken rice?

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Rice is derived from milling of paddy grain produced by farmers. Paddy typically has 20-21% husk (the inedible covering of the grain) and 10-11% bran (the brown outer layer of the edible kernel). What remains after removal of the husk and bran is the white raw rice that constitutes 68-69% of paddy. The milled rice, in turn, has both whole and broken grains.

Parboiling is a process where the paddy is soaked in water, steamed and dried while retaining its outer husk. It results in the rice becoming harder with less breakage on milling.

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The parboiled rice exported from India contains 5-15% broken grains. In raw rice, the brokens are normally up to 25%. It is the rice having 100% brokens whose exports have been prohibited.

Out of the total 3.89 mt broken rice exports in 2021-22, 1.59 mt went to China, followed by Senegal (0.92 mt), Vietnam (0.34 mt), Djibouti (0.24 mt) and Indonesia (0.21 mt).

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Finally, will India’s rice exports take a massive hit?

Not really, says Vijay Setia, former president of the All India Rice Exporters’ Association. White rice with 5% brokens from India is currently being shipped out of India at about $340 per tonne, as against $380 from Pakistan, $395 from Vietnam and $430 from Thailand. A 20% tax isn’t going to render Indian rice uncompetitive.

Moreover, it is well known that a not-too-small portion of India’s rice exports are from leaked PDS grain. The ban on shipments of broken rice – inferior grain mainly used for animal feed and also as ethanol feedstock – may be part of a larger crackdown.

First published on: 11-09-2022 at 04:12:17 pm
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